Latest news with #HLIBResearch
The Star
7 hours ago
- Business
- The Star
Pavilion-REIT forecast to continue solid showing
HLIB Research said the outlook for Pavilion-REIT for financial year 2025 remains positive. PETALING JAYA: Analysts expect stronger earnings for Pavilion Real Estate Investment Trust 's (Pavilion-REIT) in the second half of this year (2H25) as the group's growth continues to gain momentum. The group reported its second quarter of financial year 2025 (2Q25) core net profit of RM78.7mil earlier this week, down 13% quarter-on-quarter and up 17.2% year-on-year, bringing 1H25's total to RM169.1mil, which was in line with most consensus expectations. Hong Leong Investment Bank Research (HLIB Research) said in a report the outlook for Pavilion-REIT for financial year 2025 (FY25) remains positive, underpinned by sustained tourism-driven footfall at key malls such as Pavilion Kuala Lumpur and Pavilion Elite, which contributed about 67% of 1H25 revenue. 'This, along with management's low to mid-single-digit rental revision guidance, supports our view of a resilient FY25 performance,' it added. HLIB Research noted that Pavilion-REIT's management had observed a notable increase in tourist footfall at Pavilion KL and Pavilion Elite over the past two to three weeks. 'This aligns with our 2H25 outlook, where we expect sustained high footfall at these prime malls supported by Visit Malaysia 2026 initiatives and the mutual visa exemption between Malaysia and China,' the research house said. HLIB Research, which maintained a 'buy' call on the stock with an unchanged target price of RM1.77, said it remains positive on the REIT, underpinned by a favourable tourism outlook, which is expected to boost footfall and spending in key assets like Pavilion KL and Pavilion Elite, reinforcing its growth momentum. CGS International Research (CGSI Research) said it continues to see Pavilion-REIT as a proxy for growing private consumption, an uptick in tourism and accelerated earnings expansion from Pavilion Bukit Jalil (PBJ). The research house said the group is expected to post higher 2H25 earnings backed improving occupancy and earnings from PBJ, incremental contributions from the newly acquired Banyan Tree Kuala Lumpur hotel and Pavilion Hotel Kuala Lumpur as well interest savings following the overnight policy rate cut on July 9. On key takeaways from Pavilion-REIT's 2Q25 briefing earlier this week, CGSI Research said management highlighted that PBJ's valuation has been maintained at RM2.2bil following a recent revaluation exercise by consultants Knight Frank and KPMG. Therefore, the outstanding acquisition consideration remains unchanged at RM400mil (with RM1.8bil already paid), which is due next month. 'We believe this could lead to a modest increase in gearing, as it draws down additional debt to fund the remaining consideration,' the research house said. CGSI Research reiterated an 'add' call on the REIT with a target price of RM1.79 per share. RHB Research, meanwhile, kept a 'buy' call with a new target price of RM2 per share. It said Pavilion-REIT's 1H25 results were in line with expectations and supported by the solid performance of PBJ. According to the research house, Pavilion REIT's stands to benefit from its robust asset quality, the recovery in tourism, and exposure to floating-rate debt (88%), which makes it a beneficiary of recent interest rate cuts. On the REIT's outlook, RHB Research said it expects 3Q25 retail sales to remain soft, due to the absence of festival-related spending, before picking up in the seasonally stronger 4Q25.
The Star
a day ago
- Business
- The Star
Deposit costs to buoy Affin Bank
HLIB Research said Affin's loan pipeline remains robust at about RM9bil. PETALING JAYA: Affin Bank Bhd 's net interest income (NIM) is expected to remain resilient in the lender's upcoming second quarter (2Q25) earnings announcement, analysts say. Affin's NIM is expected to be underpinned by a solid loan base, said Hong Leong Investment Bank Research (HLIB Research). Despite some churn, the research house said Affin's loan pipeline remains robust at about RM9bil. 'Concurrently, 2Q25 NIM is expected to remain stable sequentially as proactive cost of funds optimisation efforts are set to largely offset any asset yield pressure from loan competition. 'Meanwhile, with the yields for 10-year Malaysian Government Securities currently still below 3.5%, there's significant room for Affin to capitalise on favourable trading opportunities,' HLIB Research said in a report. HLIB Research also expects the bank's gross credit cost to remain stable, supported by steady asset quality. Additionally, improved recovery momentum should help keep net credit costs within single digits for this financial year (FY25). 'We maintain our 'buy' rating on Affin, with an unchanged target price of RM3, implying a 0.60 time FY26 price-to-book value. 'We believe the bank is on the cusp of a notable enhancement in profitability, primarily driven by a fundamental shift in its funding mix, alongside a robust loan pipeline and enhanced operational efficiencies, which are set to drive return on equity.' The research house said while sector-wide asset yields have gradually declined, Affin's primary challenge and significant opportunity lie in managing its cost of deposits. It said liquidity following the cut in the Statutory Reserve Requirement could partially offset the impact of the recent 25 basis points (bps) cut in the overnight policy rate (OPR) . Deposit competition is easing and Affin is expected to benefit from an increase in low-cost current account and savings account deposits, driven by inflows from Sarawak, the bank's major shareholder. This is estimated at around RM130mil per month by 3Q25. According to HLIB Research, this allows the bank to shift from costly promotional rates for deposits to lower-cost payroll-based accounts, helping build a more stable and cheaper funding base. 'Interestingly, our tracker on retail fixed deposit (FD) promotional rates showed that after the 25bps OPR cut on July 9, Affin aggressively slashed its FD promotional rates by between 35bps and 50bps, whereas peers only cut up to 25bps. 'This steeper reduction suggests a deliberate strategy, likely driven by the anticipation of cheaper funding sources coming online, which enables Affin to reduce reliance on higher-cost deposits,' the research house said.
The Star
a day ago
- Business
- The Star
Country still an attractive investment destination
PETALING JAYA: Tariff negotiations and the 13th Malaysia Plan (13MP) will be key factors that determine how investor sentiment is on Bursa Malaysia for the second half of the year (2H25). Hong Leong Investment Bank Research (HLIB Research) is optimistic Malaysia can negotiate a lower tariff level than the 25% announced by the White House effective before the Aug 1 deadline date. However, it said even if the tariff rate was to remain at the current level, the country will remain an attractive investment destination among foreign investors despite Vietnam (20% tariffs) and Indonesia (19% tariffs) having successfully negotiated a lower tariff rate. 'The gaps are modest and we believe they unlikely to deter foreign investments meaningfully. Even if tariffs remain elevated, policy tools like tax incentives can cushion the impact, in our view,' the research house stated in a strategy report. It added that Malaysia's corporate tax rate of 24%, versus 22% in Indonesia and 20% in Vietnam, has not historically hindered investments here due to the country's strong manufacturing base and supply chain links. 'We see these structural strengths will continue to make Malaysia an attractive destination under the global supply chain diversification or '+N' strategy,' HLIB Research stated. The research house has a 2025 target of 1,640 points for the benchmark FBM KLCI, with the valuation based on a 14.5 times price-earnings multiple, adding there is ample liquidity on the sidelines which is deployed increasingly by buying on dips. It however warned global markets are vulnerable to profit-taking and top-slicing activities, following the sharp rally after the announcement of US tariffs in April. 'Global equity prices have stayed relatively resilient, and overall market composure seems intact, which is arguably too calm. 'This prevailing stability may reflect a degree of complacency that suggest markets could be underpricing the risk of Trump following through with his latest tariff threats in August,' HLIB Research stated. It added the muted reaction on global markets may inadvertently embolden US President Donald Trump to follow through with his high reciprocal tariffs as his confidence has been reinforced by several recent successes such as the over US$100bil in customs duties collected without significantly derailing the economy, and continued strength in US equity markets which are trading at record highs. The research house however anticipates the equity market in the third quarter of this year (3Q25) to remain volatile due to macro and policy factors with 4Q25 likely becoming more calmer with any sharp drop in the market viewed as an opportunity to buy high beta stocks in particular. HLIB Research forecast the 13MP, which will be tabled in Parliament by the end of this month, to propose RM440bil of development expenditure and to have a globalist stance underpinned by the Madani ethos with projects reinforcing national flagship policies like the National Energy Transition Roadmap, New Industrial Masterplan 2030 and the National Semiconductor Strategy. This should provide leads for investors to pick stocks that can benefit from the 13MP plans. HLIB Research top picks at present are stocks of companies like CIMB Group Holdings Bhd , Sunway Bhd , Gamuda Bhd , 99 Speed Mart Retail Holdings Bhd , AMMB Holdings Bhd , IOI Properties Group Bhd , Dialog Group Bhd and SMRT Holdings Bhd .
The Star
4 days ago
- Business
- The Star
Recovery in sight for Klang Valley office market
KUALA LUMPUR: After more than a decade of oversupply and subdued demand, the Klang Valley office market may finally be turning a corner, according to Hong Leong Investment Bank Research (HLIB Research). In a recent sector note, the research house said the prolonged mismatch between supply and demand, exacerbated by large completions during the pandemic, had led to persistently high vacancy rates of 20% to 30% and stagnant rental growth. However, the imbalance is now beginning to ease. 'We believe that the Klang Valley office market has likely hit an inflection point and is poised for sustained recovery ahead,' HLIB Research said. The research house identified several structural tailwinds supporting its view. First, it noted anecdotal evidence of improved take-up rates in newer, higher-quality office developments, suggesting that the prolonged supply glut is starting to clear. Second, it said Malaysia's pivot towards a high-value, high-tech and high-growth economy – in line with national frameworks – is fuelling demand for office-based operations. 'New drivers of growth such as semiconductors, digital services, green technology, electric vehicles (EVs) and artificial intelligence (AI) are increasingly reliant on knowledge, innovation and service-based functions, which typically require office-based environments for research and development, engineering, design and management,' it noted. Third, HLIB Research said foreign direct investment (FDI) that initially focused on manufacturing was now expanding into regional headquarters and support offices. The research house said since US-China trade tensions emerged in 2018, Malaysia has benefited from supply chain shifts, attracting manufacturers building a presence. HLIB Research noted that recent investments from global tech giants like Microsoft, Google, Amazon Web Services, Oracle and ByteDance, which often begin with data centres, are typically the first step up to anchoring their long-term presence in a new market. It cited the example of ByteDance, which has become an anchor tenant at Sunway V Tower in Kuala Lumpur, housing functions such as customer service, administration, human resources and payroll, and business development. HLIB Research said investor confidence is also gradually being restored by clearer national agendas and political stability following the last general election in 2022. 'Amid this renewed policy clarity and stability, Malaysia is regaining its appeal as a cost-competitive alternative to regional peers, particularly for shared services, regional operations and investments in the digital economy,' it said. The research house expects the recovery to first take hold in Selangor and the fringe areas of Kuala Lumpur, where the supply overhang is less severe, before gradually extending into central Kuala Lumpur. Within this cycle, it believes the strong performers will be newer Grade A offices, certified green buildings with energy-saving features, offices integrated with public transport and retail amenities, and those managed by experienced property teams. As top picks for exposure to the office market, it named IGB Commercial Real Estate Investment Trust (REIT), with 3.5 million sq ft of net lettable area in the Klang Valley; IOI Properties Group Bhd , with 2.26 million sq ft in Putrajaya and Puchong; and Sunway Bhd together with Sunway-REIT, which have a combined 2.37 million sq ft in the Klang Valley.
New Straits Times
17-07-2025
- Business
- New Straits Times
Gamuda set for 40-year income from RM5bil Perak water project
KUALA LUMPUR: Gamuda Bhd is expected to secure long-term recurring income for more than 40 years from its RM5 billion water treatment venture in Perak, according to HLIB Research. The group, via a joint venture with Perbadanan Kemajuan Negeri Perak (PKNPk), has been tasked by the state government to design, construct and operate water treatment and distribution facilities in Kerian, northern Perak. The project will supply treated water to the Kerian Integrated Green Industrial Park, with excess channelled to Penang. This will be done on a privatisation basis whereby the agreement is expected to be finalised in 90 days, in return for a minimum concession period of 40 years. It is expected to be up and running by 2030. HLIB Research said the formal construction contract is expected to materialise in 2026, with an estimated value of RM4 billion. The firm said with 50 per cent stakes in the JV, Gamuda's share of investment is estimated to be around RM500 million over the coming years, with negligible impact on the group's net gearing due to its growing equity base. The group is guiding for pre-tax profit margins of 10–12 per cent for the construction phase. "Upon completion, this water project will serve as Gamuda's second recurring income source domestically, to be complemented by the Ulu Padas hydro project in Sabah. "Commercial parameters, including internal rate of return guidance remains fluid but we expect significant recurring earnings contributions to Gamuda. "We had previously estimated Gamuda's share of profit from its Ulu Padas hydro project at RM70 million annually," HLIB Research added. HLIB Research made slight upward revisions to Gamuda's earnings forecasts, raising FY26 and FY27 projections by 2.1 per cent and 4.4 per cent, respectively. The firm maintained its "Buy" call on Gamuda, raising its target price to RM5.70 a share from RM5.50, implying a 10 per cent discount to its sum-of-parts valuation of RM6.34. "We remain positive on Gamuda's order book trajectory, underpinned by a growing pipeline of shortlisted international projects and an expected domestic data centre construction cycle," it added. Gamuda currently has an order book of RM37.2 billion and is actively expanding into the Australian renewable energy space, including pumped hydro projects, which HLIB views as a potential catalyst for long-term growth.
